Episode 439: The Mysterious Power Of A Hospital Bill

If you have good health insurance, you've probably never even seen a full hospital bill. Count yourself lucky.

For a giant article in this week's Time, Steve Brill went line by line through a handful of bills from hospitals around the country. On today's show, he tells us about the crazy thicket of high prices and hard-to-decipher codes that he discovered, and we talk about what it means for the price of health care in America.

There's a strange and mysterious document out there, a document that affects the lives of almost every American, holds great sway over our health and well-being. It is a document that contains valuable secrets about the problems confronting the U.S. economy. I speak, of course, of the hospital medical bill.

Hello and welcome to PLANET MONEY. I'm Alex Blumberg.

JACOB GOLDSTEIN, HOST:

And I'm Jacob Goldstein. Today on the show, we are going to crack the code of that incredibly important, incredibly mysterious document, the hospital bill.

BLUMBERG: Right. And we're going to do it with the help of journalist Steven Brill, who just wrote a 24,000-word article in Time magazine - 24,000, Jacob. To, maybe, non-journalists, that doesn't mean much. It's a small book.

GOLDSTEIN: Not that small.

(LAUGHTER)

BLUMBERG: Right, exactly. And it's all about this document, the hospital medical bill. Where do the prices come from on it?

GOLDSTEIN: And one key thing that makes this document so important is this really weird, problematic thing in health care. It's unlike almost anything else in the economy. And that thing is, the people who are getting health care - patients - they typically don't know how much what they're getting actually costs. And in fact, a lot of the time, if you ask a doctor - you say, Doc, how much is this going to cost? - the doctor doesn't know either.

BLUMBERG: Right - because, for most of us, it's set up between the hospital and the insurance company or the doctor's office and the insurance company. The insurance company is the one paying the bills for most of us for our health care. So we never actually see the bill.

But these bills do exist. They get sent to and fro. And so what Steven Brill did for this article was to track down a bunch of actual bills. He found a bunch of patients who either didn't have insurance or for various other reasons had received bills directly from the hospital. And he went line by line through these hospital bills.

And he starts his article with a guy named Sean Recchi, who was diagnosed with non-Hodgkin's lymphoma and went to a place called MD Anderson Cancer Center. MD Anderson's bill to Mr. Recchi it was $83,900. And Brill wanted simply to understand what medicines and services were included in that number. How did the hospital arrive at those prices? But when he looked at the 344 line items that made up that total figure, it still didn't help that much.

STEVEN BRILL: It's all in, you know, acronyms and...

BLUMBERG: It doesn't say chest X-ray, yeah.

BRILL: It doesn't say, you know, run-of-the-mill blood test. It does not say that. Right? You see a charge for $28, and it says - whatever the abbreviation is, it's in the article - I don't remember it - for what turns out to be a diabetes test strip.

BLUMBERG: Right?

BRILL: OK? It's $19 or $18, something...

BLUMBERG: Yeah, Accu-Chek CCRV.

BRILL: Right. So you have no idea what that is, right?

BLUMBERG: And you look at his bill - and, sort of, like, the itemized - you know, as you sort of go down - and so there's all these things. You said it was 344 lines. And from, you know, things like the one-of-a-kind cancer drug - you know, something that's very rare that most of us don't have an experience with - but all the way down to, for example, it said - one line on the bill was one acetaminophen - wait...

BLUMBERG: That's not that much. Obviously, that's not what's going to go to inflate his entire bill. But that, sort of - you say it sets the tone.

BRILL: It's sort of emblematic of everything we're talking about because you can buy them - you know, you can go to Amazon and buy them - I think a bottle of a hundred of them for a $1.49.

BLUMBERG: Right.

BRILL: So you can get a hundred for what they're charging him for one.

BLUMBERG: Right.

BRILL: And, you know, they charge him for the little alcohol pad they put on you before they give you a shot - you know, an injection?

BLUMBERG: Yeah.

BRILL: They charged him $7 for that.

BLUMBERG: For an alcohol pad?

BRILL: Yeah. Right.

BLUMBERG: So you start digging, and you have lots of these bills. Everybody you've talked to - you've got all this - all through the article. It's really an amazing article. And you just go - so they're all these different people who have shown you their bill. And you sort of do this for everybody, sort of looking at where these charges come from.

And then the thing that I found most - it's sort of like you get to see the wizard here because you go to the hospitals. And you say, how do you come up with that number? Right? And they started referring you to this document.

BRILL: The chargemaster. Well, that's based on our chargemaster. I said, oh, well - and that's the first time I had ever heard that term.

BLUMBERG: Chargemaster?

BRILL: Yeah. If you live in the alternate universe of the health care economy, everybody knows what the chargemaster is.

BLUMBERG: Right.

BRILL: It's just that none of us do. It's a list - six-, seven-, 10,000 items long of everything the hospital provides, ranging from the generic Tylenol pill to, you know, the $13,000 wonder drug and everything in between. It's the $1,791 charge in the case of MD Anderson in Houston for the room each night. You would think that for $1,791 for the room, you know, they'd throw in the Tylenol.

BLUMBERG: So every hospital has their own charge list?

BRILL: Yeah. And none of them are consistent. I mean, just by coincidence, I ended up with two bills from hospitals that are, you know, just 20 or 25 miles away from each other in Bridgeport, Conn., and Stamford, Conn. And one of the blood tests - coded with acronyms and everything on the chargemaster and on the bill - at one of the hospitals was $199. And it was $239, you know, up the road at the other hospital. And no one could explain it. It is unexplainable.

BLUMBERG: What - and did you ask people? Like, where do these numbers come from?

BRILL: Yeah.

BLUMBERG: What did they say?

BRILL: Two different kinds of answers. One - at Bridgeport Hospital, which is part of the Yale New Haven Health System - they basically said, well, that's a historical charge. We really can't trace it to anything. But the more typical answer I got was, we can't talk to you about any of that because it would violate the HIPAA laws. HIPAA is the federal statute ensuring the privacy of patient records.

It even got to the point of absurdity where I was in this conversation with the hospital - Mercy Hospital in Oklahoma City - where they charge $38 or something like that for the disposable surgeon's gown. And you can buy them on eBay, like, for $5 or $6. And I said, well, why do you charge $38 for the surgeon's gown? Well, it would violate patient privacy laws to tell you that. And I said, well, if there was a law governing, you know, surgeons' privacy, maybe we could have a discussion about it. But what does it have to do with the patient? It has nothing to do with the patient.

I think there are two reasons, though. One is they don't want to talk about it. But I think the more explainable reason is they've just never been asked. They were just flat-footed.

BLUMBERG: Were you surprised at how - I get the impression that the hospital administrators were a little bit hostile to you coming around and...

BRILL: They were hostile. But they weren't - they were more, sort of, surprised than hostile. It was - they just looked at me like I was crazy. Who is - why are you asking about that? Who cares about that? And, you know, then they got hostile when they realized I was really serious about it.

I imagine now that the article's published, there will be a fair amount of hostility, although I will tell you that since the article has been out, I've gotten hundreds and hundreds of emails and letters, a lot of which are from doctors and people working in medical institutions saying, you only touched the tip of the iceberg. I mean, I have this real - you know, you should know what's going on.

I mean, one doctor at one hospital - that's in the article - sent me a copy of a memo he'd gotten from his supervisor with a graph pointing out that he had been ordering fewer of a certain kind of lab tests - I don't want to be specific - but a certain kind of lab tests. And it was a graph that said he was down, like, 5 percent in the tests he'd ordered over the last quarter and he'd better get that back up.

BLUMBERG: Wow. So he was - the hospital was basically saying, you're not ordering enough tests. We're not bringing in enough money.

BLUMBERG: Wow. OK. So in the article when you talk about - it's sort of - you've got the chargemaster. You've got all the, you know - so let's say you have some drugs, a bunch of diagnostic tests that are all being paid according to the chargemaster. One of the things that everybody said to you is, well, nobody actually pays from the chargemaster. That was something that sort of came up again and again.

And so what happens is everybody knows, like, OK, those are the official prices. But if you're anybody in the health care system, you don't pay those. So insurance companies tend to pay less.

BRILL: Well, yeah. But let's stop there...

BLUMBERG: Yeah.

BRILL: ...Because, first of all, if you're anybody in the health care system - well, if you're someone without insurance, that's what you're going to get billed for. And that's what you're going to get sued for.

BLUMBERG: Right.

BRILL: Basically - you know, the best way to boil this down is the people who are least able to pay - those without insurance - are the only ones asked to pay the chargemaster.

BLUMBERG: Right. And then...

BRILL: So that's an upside down world.

BLUMBERG: And then everybody else...

BRILL: And then the insurance companies...

BLUMBERG: Yeah.

BRILL: ...Get different kinds of discounts depending on the leverage they have with, in this case, the hospital. So let's - and one of the troubling things I sort of found is that hospitals are increasingly consolidating their power in the marketplace by buying up the physicians' practices, which means that your doctor will send you to that hospital, or by buying up competing local hospitals.

So that if you're the - if you're one of two major hospitals in a metropolitan area - and there are a lot of metropolitan areas like that, two major quality hospitals in a metropolitan area - and you're an insurance company - you want to sell insurance in that area, you have to have that hospital in your network. You're not going to be able to sell insurance. So the hospital has all the leverage over you. You know, if it's a game of chicken, the hospital can say, well, you know, we don't need you. You need us.

Now, one of the ironies of Obamacare is, by creating health insurance exchanges - which are a good thing - if you create more competition in the insurance industry, you lower, still more, the market power of the insurers to negotiate with these ever-expanding hospitals.

BLUMBERG: Right, right. So you're saying that when - because of the exchanges that are a big part of Obamacare, you think it's actually going to worsen the negotiating power of the insurance companies?

BRILL: Here's what I think is going to happen with Obamacare. Obamacare does a lot of good things. It restricts how hospitals can sue people for these chargemaster bills. Obviously, it puts an umbrella over a lot more people. It gets rid of the kind of policies that a couple of my patients had there where they thought they had health insurance and they really didn't because there were annual limits on payouts and lifetime...

BLUMBERG: Oh, there was, sort of, written into the small print of the policy?

BRILL: Yeah. And it gets rid of, you know, the pre-existing condition things. But if you think about that by eliminating the restriction on pre-existing conditions and by getting rid of the annual and lifetime, you know, payout limits, whatever else you think of insurance companies, you're dramatically increasing their risk and their exposure. And that's why even now already insurance premiums are going up...

BLUMBERG: Right.

BRILL: ...Going up a lot because they're going to have to pay out a lot more.

BLUMBERG: So you've got the uninsured people that are paying the chargemaster. And then you've got the insurance companies who are paying some discount off of the chargemaster.

BRILL: Then you have Medicare.

BLUMBERG: And then you have Medicare.

BRILL: Well - and Medicare is the only place, oddly enough - irony of ironies - where you start to approximate a real marketplace because Medicare has buying power that, in any community, rivals that of the hospital.

Now, the hospitals don't have to accept Medicare patients. They all do. Why? Because they represent probably a third or more of the hospital stays at any given hospital anywhere. They pay very quickly. You know you're going to get your money. Insurance companies can fight with you, dispute you, take a long time. And certainly the uninsured don't pay so quickly. But Medicare drives the prices down. Medicare, you know, culls all this data and, according to the law and reality, pays what the real cost of providing each service is - including overhead, including salaries, including all that stuff.

Now, if you want to prove that hospitals don't lose money on Medicare, just drive up and down any highway in Florida and look at all the billboards. And all the billboards are advertising all these brand-new, you know, shiny hospitals. And guess who those patients are. They're all Medicare patients. So you know, hospitals wouldn't advertise for patients that they're losing money for.

BLUMBERG: Right. They're not advertising...

BRILL: They wouldn't keep expanding. The other irony about Medicare is that, in the debate over how to cut the deficit and how to cut spending on entitlements, I think - I know - I can make the argument that if you lowered the Medicare age - not raised it - if you lowered it to 63 or 64, you'd actually cut the deficit.

And that's because Medicare buys its services so much less expensively than insurance companies and administers itself so much more efficiently that, in the wake of Obamacare where the government is now going to subsidize people who can't afford their own health insurance, rather than subsidize a more expensive private insurance premium, letting those people buy at higher premiums than a 65-year-old, a Medicare service would actually cut the deficit. And you'd save money. But it's, you know, Obamacare really, at the end of the end of the day, is about who pays the high cost of health care, not about cutting into the high cost of health care.

BLUMBERG: So Jacob, when I think about Steven Brill's article and why I liked it so much, I think it did a really good job of illustrating one of the key problems out there, this crazy lack of price transparency. You as a patient just don't know the price of the care you're getting. And that is one of the key factors in the rise of health care spending we're all talking about all the time. And pretty much anybody you will talk to will agree this is a key part of the problem.

GOLDSTEIN: But then, of course, the question is, what do you do about it? And the article is actually kind of short on solutions. It's this long description in great detail of all these problems and sort of vague about solutions. But in some of the interviews after, he has come out with some clear solutions. He does pick a side. For one thing, he thinks we should lower the age at which people qualify for Medicare. You know, like he told you, Alex, Medicare really is good at getting low prices out of hospitals. So...

BLUMBERG: Compared to insurance companies...

GOLDSTEIN: Compared to insurance companies and certainly compared to people who don't have insurance. He does also suggest that, at least for some things - say, for drugs - maybe the government should just come out and set prices for everybody and say, not just Medicare, but the price for whoever's buying this drug is going to be set by the government.

BLUMBERG: Now, there is an entirely opposite lesson you could draw, though, looking at the same set of facts that he uncovers in his article. And that is that we just need to change the way we pay for our - the services we get from hospitals. In other words, we need to take it out of the hands of Medicare and insurance companies and put it directly into the hands of the people who are actually consuming the care, the patients. They are the ones who should be making these decisions and should be knowing what the costs are.

And advocates of this solution say, you know, we could take some of the money right now that our employers, for example, are paying into our insurance premiums. And if that money just went directly to us, then we would be paying our own bills, and hospitals would be forced to compete with each other for our business. We would shop around for health care. Hospitals would compete for our dollars.

GOLDSTEIN: Brill argues - yeah, sure, the market is a great way to sell TVs and cellphones and groceries. But health care is fundamentally different, you know. I mean, if you have chest pains, you're not going to, like, get on the Internet and start Googling - what hospital in my neighborhood has the best price for a heart attack treatment? Right?

BLUMBERG: (Laughter) Right.

GOLDSTEIN: You're going to call 911, and the ambulances come and get you. And it's going to take you wherever it takes you. So he argues the market is not really a sensible model to use for health care.

BLUMBERG: Right. And obviously, we're not going to settle this debate right here. But the one thing that's clear, our health care system is a total mess. And to see that, all you have to do is look at a simple hospital bill.

(SOUNDBITE OF SONG, "SHOCK TO YOUR SYSTEM")

TEGAN AND SARA: (Singing) You got a shock to your system. Pull yourself out of it. I know that shock to your system...

BLUMBERG: As always, we would love to hear your thoughts, questions, comments. Please email us at planetmoney@npr.org.

GOLDSTEIN: You can also find us on Twitter, Facebook, on the web at npr.org/money. And we will, of course, have a link to Steve Brill's article.

BLUMBERG: And while you're on our website, which is also accessible through planetmoney.com, we would love if you could fill out our survey. We just want to know more about you guys. I'm Alex Blumberg.

GOLDSTEIN: And I'm Jacob Goldstein. Thanks for listening.

(SOUNDBITE OF SONG, "SHOCK TO YOUR SYSTEM")

TEGAN AND SARA: (Singing) What you are - what you are is lonely. What you are - what you are is lonely, what you are. You must rely on love once in a while to give you reason. Transcript provided by NPR, Copyright NPR.